Auto File: Death Valley Days

Joe White Global Autos Correspondent joe.white@thomsonreuters.com Greetings from the Motor City! I say this every Friday, but after reading this week's news, https://www.reuters.com/markets/europe/tgif-is-it-over-yet-2022-05-13 TGIF, for real! When the best news of the week is that astronomers have found a black hole at the center of our galaxy https://www.reuters.com/lifestyle/science/black-hole-scientists-announce-groundbreaking-milky-way-galaxy-discovery-2022-05-12/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file that looks like the Eye of Sauron, you know it's rough. No wonder the company that makes Campari thinks it is a great time to open more bars https://www.reuters.com/business/retail-consumer/campari-plans-new-bars-help-whet-aperitif-appetites-2022-05-12/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file. Another round of Negronis https://urldefense.com/v3/__https://youtu.be/MNxWjRU8oxU?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file__; !!GFN0sa3rsbfR8OLyAw!f3GvpZEy-bxhjOmyZjVHx1K8d2zLMg7Cq3WaH6_lSXl kRF9IvqTLuk1W4JGib7oB7kw1w-jvbJRcLswJrMnxAWBU$, please! Today, Rivian and Lordstown Motors (RIDE) hunker down, Magna's CEO sees a silver lining in EVs, and Europe's combustion vehicle "ban" may be a short-term boon for automakers. And, yes, Elon Musk https://www.reuters.com/technology/musk-says-44-billion-twitter-deal-hold-2022-05-13/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file is stirring the pot again. Here we go - * EV startups and the profit desert Electric vehicle startups created in a time of free money and exuberant https://urldefense.com/v3/__https://www.wsj.com/articles/irrational-exuberance-alan-greenspans-call-20-years-later-1480773602?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file__; !!GFN0sa3rsbfR8OLyAw!f3GvpZEy-bxhjOmyZjVHx1K8d2zLMg7Cq3WaH6_lSXl kRF9IvqTLuk1W4JGib7oB7kw1w-jvbJRcLswJrOpXmsDV$ equity markets are now staring across what could be a financial Death Valley. Where rivers of investor cash once flowed, now there are dry gulches. The financial market turbulence frames the moves that EV startups Rivian and Lordstown Motors (RIDE) are making to survive the crossing between now and a future when production can generate enough cash flow to fund operations and growth. Lordstown Motors (RIDE) made the most dramatic pivot as its stock plunged https://graphics.reuters.com/LORDSTOWN-STOCKS/dwvkryxmlpm/index.html?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-fileand cash reserves evaporated. The company closed a deal to sell its Ohio assembly plant to Apple manufacturing partner Foxconn (FXCOF) https://www.reuters.com/business/autos-transportation/lordstown-motors-closes-deal-sell-assets-foxconn-shares-surge-2022-05-11/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file. Just as noteworthy, Lordstown and Foxconn (FXCOF) said they have formed a joint venture to develop electric vehicles https://urldefense.com/v3/__https://investor.lordstownmotors.com/news-releases/news-release-details/lordstown-motors-and-foxconn-close-asset-purchase-agreement-and?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file__; !!GFN0sa3rsbfR8OLyAw!f3GvpZEy-bxhjOmyZjVHx1K8d2zLMg7Cq3WaH6_lSXl kRF9IvqTLuk1W4JGib7oB7kw1w-jvbJRcLswJrE7cDM6y$ using a Foxconn EV architecture called MIH (Mobility in Harmony.) Lordstown Motors (RIDE) is no longer a company trying to become the next Ford or GM. Instead, it is becoming a company, in collaboration with Foxconn (FXCOF), that will offer other automakers (i.e. Chinese companies and tech companies) a quick path to developing and then assembling electric vehicles for the North American market, while nurturing its own brand without the cost of operating a factory. Client No. 1 will be Fisker, which said it has agreed to have Foxconn (FXCOF) build its PEAR EV line at the Ohio factory starting in 2024 https://investors.fiskerinc.com/news/news-details/2022/Fisker-and-Foxconn-Confirm-Fisker-PEAR-Production-in-Ohio/default.aspx. Fisker said it intends to build "a minimum of 250,000 PEAR units a year" once production ramps up. At Rivian, meanwhile, CEO RJ Scaringe is hanging tough https://www.reuters.com/business/autos-transportation/rivian-automotive-reiterates-annual-production-outlook-shares-jump-2022-05-11/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-filedespite supply chain snafus that are hobbling production and consuming cash at the rate of $11 million a day, $1 billion a quarter. Rivian's response to worried investors is that it can "live within our means" and rely on its $17 billion cash pile to sustain operations and fund construction of a new factory in Georgia through 2025 https://assets.rivian.com/2md5qhoeajym/7o7p74ovi3n6M3QBLM6s3v/8f45665e61a0a943a871559c872edbf2/Rivian-Q1-2022-Shareholder-Letter.pdf. Don't waste water. Clean your plates. Guard the ammo with your life. Investors like that talk. Rivian shares bounced back. Even so, the company's market value is still just $4 billion more than its cash pile. Some investors don't want to watch "1883" again. * Tesla, Ford quit the passage to India Ford and Tesla are jamming the brakes on plans to expand in India. Tesla has shelved plans https://www.reuters.com/business/autos-transportation/exclusive-tesla-puts-india-entry-plan-hold-after-deadlock-tariffs-sources-2022-05-13/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file to enter the Indian market after failing to get favorable tax treatment for imported vehicles. Ford scrapped a plan to re-tool factories in India to build EVs for export https://www.reuters.com/world/india/ford-drops-plans-making-evs-india-et-2022-05-12/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file. Expensive ventures of all kinds will be at risk as automakers grapple with rising costs and worries about recession. * EVs: The silver lining for suppliers These are dark and stormy times for auto technology suppliers. For Magna, the fourth largest global auto supplier, electric vehicles provide a beacon of hope. Case in point: Magna has a long history stamping and welding metal for automakers. Now it is using that know-how to build battery enclosures for vehicles such as the GMC Hummer EV and the Ford F-150 Lightning. In 2021, Magna booked virtually no revenue for battery enclosures, CEO Swamy Kotagiri said on the sidelines of a company technology show in Pontiac, Mich. Then, Ford began boosting projected production for the Lightning from 40,000 a year to 150,000 vehicles a year, and potentially more. General Motors (GM) likewise accelerated EV production plans. Now, Kotagiri said, Magna anticipates its battery enclosure business will have $600 million in sales by 2024 and $1.5 billion by 2027. Magna sees an even bigger upside for its electric drive motor business, he said: $300 million in 2021, now projected at $4.5 billion in five years. * The Porsche IPO: Wait for it The wait for a Porsche IPO might drag on longer if financial markets don't stabilize https://www.reuters.com/business/autos-transportation/porsche-se-says-feasibility-sportscar-maker-ipo-depends-market-conditions-2022-05-13/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file. The chair of Porsche Automobil Holding, the corporate entity of the Porsche and Piech families, said whether an IPO of the sports car brand goes off in the fourth quarter "depends on a large number of different influencing factors ... final decisions have not been made." * GM's Mexican wage deal General Motors (GM) and the union representing workers at its biggest assembly plant in Mexico agreed to a new contract https://www.reuters.com/business/autos-transportation/gm-agrees-hike-wages-85-major-mexico-plant-union-says-2022-05-12 that union officials said will give workers building Chevy Silverados and GMC Sierras 8.5% raises that just outpace inflation. * Nissan (NSANF), Honda (HMC) hit the red button Honda (HMC) and Nissan (NSANF) followed in Toyota's footsteps this week, warnings that surging input costs will drag profits for the current fiscal year below earlier forecasts. Honda's (HMC) warning Friday was especially stark https://www.reuters.com/business/autos-transportation/honda-warns-rising-costs-forecasts-weaker-annual-profit-2022-05-13/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file: Even though the company expects vehicle sales to rise by 3%, the company expects fiscal year profits to fall by 7% - a 13% downward swing vs. analysts' forecasts. Nissan (NSANF) said it expects flat operating profits for the fiscal year, https://www.reuters.com/business/autos-transportation/nissan-swings-q4-profit-beats-estimates-2022-05-12/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file effectively cutting its financial outlook. * SPACS: Still a thing? EV and auto tech companies that merged with SPACs to go public have been mauled since January. But that hasn't snuffed out the hopes of all SPAC proprietors or startup companies. EV battery tech company Amprius is proposing to go public via a SPAC https://www.reuters.com/markets/us/battery-maker-amprius-tech-go-public-via-939-mln-spac-merger-2022-05-12/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-filemerger at a valuation of $939 million - betting that the accelerating race to improve on current battery tech will draw investors in. And a Chinese electric supercar company, CH-Auto, is also signaling it wants to take the SPAC fast-lane to an IPO. That could be a tougher test, says Breakingviews https://www.reuters.com/breakingviews/super-car-spac-tests-ev-hypes-reset-expectations-2022-05-12/?utm_source=Sailthru&utm_medium=newsletter&utm_campaign=auto-file. * Europe's watery ICE ban The European Parliament is pushing ahead with a proposal to ban sales of new internal combustion engine (ICE in car-speak) vehicles by 2035 https://www.reuters.com/business/autos-transportation/eu-lawmakers-back-effective-ban-new-fossil-fuel-cars-2035-2022-05-11. That said: The lawmakers did not endorse a proposal to require automakers to cut CO2 emissions from ICE models by 55% between now and 2035. That could allow automakers to invest in long-term EV product programs, while getting a reprieve from the expense of cleaning up combustion SUVs and luxury cars that make all the money today. As ever with the EU, it will take much more time to lock in final rules. * ADAS systems struggle to see oncoming cars Driver assistance/automated cruise control systems do a good job of keeping your vehicle at a safe distance from a vehicle traveling ahead in the same direction. But they may not avoid a vehicle coming at your car head-on https://www.reuters.com/business/autos-transportation/assisted-driving-systems-struggle-with-collision-tests-study-2022-05-12. That's the conclusion of a study by researchers for AAA, who found that the ADAS systems in a Tesla Model 3, Subaru Forester and Hyundai Santa Fe did not stop the vehicles from colliding with oncoming cars. * A nasty recall for Mercedes Mercedes said owners of some 292,000 vehicles should not drive them https://www.reuters.com/business/autos-transportation/mercedes-benz-recalls-292000-us-vehicles-over-braking-issue-2022-05-12 until dealers can check whether they have corroded brake boosters. The rare "do not drive" warning is a reminder that product defects are still a battlefront for automakers, despite years of focus on quality. Mercedes has had 17 recalls this year, according to National Highway Traffic Safety Administration data. Ford leads the recall league tables, with 27 recalls covering nearly 3.2 million vehicles https://datahub.transportation.gov/dataset/NHTSA-Recalls-by-Manufacturer/mu99-t4jn. * Cadillac's Velociraptor Rex General Motors may be committed to a future of zero emissions. But first it wants to sell you a Cadillac Escalade-V with a 682-horsepower V-8 engine https://media.cadillac.com/media/us/en/cadillac/home.detail.html/content/Pages/news/us/en/2022/may/0511-escaladev.html and a lengthy list of high-tech features including a Super Cruise system that allows the Beast to drive itself on many highways. The Cadillac Escalade line's top predator https://www.smithsonianmag.com/science-nature/new-giant-carnivorous-dinosaur-was-terror-smaller-tyrannosaurs-180978599 joins a herd of other hyper-powered combustion SUVs https://www.caranddriver.com/ford/bronco-raptor aiming to have a libertarian rock band write a song about them https://www.youtube.com/watch?v=FAvQSkK8Z8U.